Kari Karanikos is 25 years old and has six figures in debt. Karanikos is a social media director living in Pittsburgh. She is certainly one of the numerous Gen Z members who like to travel despite their high levels of debt.
A recent Bankrate survey on “Credit Card Rewards Despite Debt” found that just about one in 4 Gen Z (24%) and one in three Millennials (32%) have bank card debt. At the identical time, nearly three in five Gen Z (60%) and Millennials (61%) plan to take a summer vacation this 12 months.
Experts—and young people like Karanikos—know the way difficult it could actually be to balance debt repayment with the needs and needs of your budget. But it doesn't must be all or nothing. Learn how Karanikos balances spending and experiences, and discover ways you may do the identical.
Spend money on travel
When you book a flight, cruise or other type of travel this 12 months, go searching—you'll likely see more younger faces than older ones. That's because about 3 in 5 Gen Z (60%) and Millennials (61%) plan to Take summer holidays in 2024Only half of Generation X (50%) and lower than half of Baby Boomers (44%) say they are going to.
Younger generations are also more likely to spend more on travel this 12 months—and go into debt to accomplish that. According to at least one study, Generation Z (44%) and Millennials (37%) are more likely to spend more on travel in 2024 than in 2023, in comparison with Generation X (20%) and Baby Boomers (24%). Bankrate Discretionary Spending StudyIn fact, travel was the preferred purchase that young people were willing to borrow for, in comparison with live entertainment and dining out.
Rita-Soledad Fernández Paulino, a money and self-care counselor, says her clients often wish to repay their debt and still travel. Fernández Paulino is all for it.
“It’s important that people have a range of self-care activities that they can engage in … that allow them to take care of themselves even on different budgets,” she says.
How a Generation Z member deals with debt
When it involves balancing fun and financial savvy, Karanikos isn’t any stranger to the challenge. She does her best to juggle the 2 while keeping the larger picture in mind.
Karanikos is barely just a few years out of faculty and now faces years — and even a long time — of debt to repay. Of her six-figure debt, the bulk comes from student loans. She also has about $5,000 in bank card debt and about $3,000 in debt from a automobile lease.
Karanikos began accumulating bank card debt within the months after graduating from college but before she got her full-time job. Now she makes it some extent to Emergency fund without increasing her debt. This is because Karanikos is moving to New York City in just a few months and needs to have a number of money in her pocket.
“I am definitely thinking about [my debt] every day,” she says. But by keeping track of her debt and having a repayment plan, she feels empowered to make smart money decisions. She also tracks Side jobs to pay off their debts.
And although Karanikos recently got a raise, she is trying to keep her costs stable. In her words, she does not want to fall victim to Lifestyle inflation.
Why Generation Z prioritizes travel
It may be hard to understand how people can spend money on travel when they're already in debt, but Karanikos' motivation for travel is more than just an Instagram-worthy photo.
Karanikos' grandparents and parents are immigrants from Greece and Australia. She explains that during her childhood, her family was trying to find their way in a new environment. They often valued sacrifice over fun. But now, as a young adult, Karanikos doesn't want to miss out on anything. And she wants to be financially positioned so that she can give her family experience back.
“I think my immigrant background is a main motivator,” she says. In fact, she says traveling and experiences with family and friends are the 2 most significant things in her life.
It's also value considering the years that young people have largely missed through the pandemic. Karanikos says she and a few of her peers (aged about 24 to 26) feel like they missed the possibility to be young, to travel and never worry about money. Now they're making up for lost time.
“Logistically speaking, my debts will not be gone in the next year or two,” says Karanikos. “I don’t want [experiences] put it aside and finally live my life when I'm 30 or 35 and regret it.”
Fernández Paulino believes Gen Z members like Karanikos have the right idea. “Money is just a tool to support your well-being,” she says. “Becoming debt-free is part of your financial self-care. Traveling is a form of interpersonal self-care, emotional self-care, some would even say spiritual self-care.”
What distinguishes younger generations?
When it comes to spending differences between younger and older Americans, here are some possible factors to keep in mind:
—Young people are less likely to already be burdened with debt. According to Bankrates' survey on “Chasing Rewards While Incurring Debt,” Gen Z (24%) and Millennials (32%) are less likely to carry a credit card balance from month to month than Gen X (39%) or Baby Boomers (38%).
— Young people don't stay in debt for as long. In a November 2023 Bankrate survey on credit card use, 22% of Gen X and baby boomer credit card borrowers had credit card debt for five years or more, compared with 8% of Gen Z and 13% of millennials.
– Young people maximize rewards. Gen Z (77%) and Millennial (74%) cardholders are more likely to make all or at least some effort to maximize credit card rewards than Gen X (69%) or Baby Boomers (69%).
—Young people are less worried about their finances this year. In a November 2023 Bankrate study, Generation Z (59%) and Millennials (49%) were significantly more optimistic about their personal financial situation in 2024 than Generation X (33%) or Baby Boomers (20%). Karanikos says, “I’m pretty optimistic [about my personal finances]Maybe it's because I have a plan.”
—Young people want to present a certain lifestyle. Karanikos explains that their peers tend to compare themselves to others on social media, even though they may have different incomes. “I think the majority of Generation Z puts [travel expenses] on credit cards,” she says.
Travel without breaking the bank
Want to travel this 12 months but are on a decent budget? Here's how Gen Z members like Karanikos are spending money smarter when traveling.
Build a redemption fund
When Karanikos traveled in college, she worked extra shifts beforehand, but still had to enter debt and pay it back after the trip. Now she has developed the habit of Redemption fund. Three months before a trip, she starts putting money aside so she can travel without increasing her debt. While she still uses her credit card for travel expenses to earn points, “I attempt to be certain that the savings are there before I spend it,” she says.
To follow their example, you could get a free high-interest savings account This allows you to earn a competitive APR while still having access to your money when you need it. By setting aside a certain amount each month, you'll have cash to spend when your trip comes around.
Cutting back on your expenses will also help you build your savings fund. For example, you could spend less on take-out food or new outfits so you can enjoy local cuisine and shopping at your destination later.
Earn extra income
Fernández Paulino says that when it comes to paying for travel, you first need to understand your cash flow. “You must know your numbers,” she says. And instead of just cutting expenses to increase cash flow, Fernández Paulino advocates looking for ways to make more money.
“I’m working on it, [my clients] increase their income,” she says. “There isn’t any limit to how much we will increase our income.”
She recommends listing your skills and committing to the almost two out of five Americans with a part-time job (39%). You could use LinkedIn or your network to find better-paying job opportunities. Or you could monetize something you own, such as renting out a room in your house.
Benefit from credit card rewards
A Rewards bank card you may collect points or miles to pay to your next flight or hotel room. In addition, many Travel rewards cards allow you to collect additional rewards when you book travel through the card issuer’s portal.
Karanikos uses the Chase Sapphire Preferred® Card and the Capital One Venture Rewards Credit Card to earn points and miles that she can redeem for flights. Earn money while shopping every dayyou can save hundreds of dollars on your next trip.
Be practical with your travel destinations
Karanikos tries to visit places where her friends live so she has a place to stay. She's also going to Atlanta for a work conference this year and will extend her trip by a few days to explore the area. And she and her friends plan to visit another friend's lake house this summer.
Choosing affordable places is crucial when traveling on a budget. Some cities are more affordable than others, and you can leverage your network for accommodation and other shared resources. A Travel budget app can also help you save money while creating new memories.
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